Palley on the crisis and more

Philip Pilkington interviews Tom Palley on his new book at Naked Capitalism.


  1. Great interview, thanks for pointing me to it. Maybe somehow the term "Structural Keynesianism" legs in the mainstream. The way the redundant "Market Monetarist" label has allowed a resuscitation of monetarism.

    Incidentally, I am reading the recent book on Kalecki. It seems to me that Kalecki would qualify as practicing "vulgar economics" by the standards of this blog: that is to say, he denies the Ricardian inverse relationship of wages and profit. Is this a fair statement, or have I misunderstood?

  2. Nope. The Ricardian (Marxist) believe on an inverse relation between wages and profits is related to the determination of production prices (given the quantities). It is perfectly okay to note that higher wages, leading to higher output (in your theory of output, and employment based on the Principle of Effective Demand), will lead, in turn, to higher profits. The relation of income distribution and output (or accumulation) outside the core is complex and allows for several possibilities. Kalecki is the quintessence of the approach in this blog. Prices on the basis of costs (even if one might have a different solution than his degree of monopoly) and effective demand dependent on income distribution.

  3. It could perfectly be Naked Kaleckianism.

  4. Thanks. What I was missing was that crucial

    "related to the determination of production prices (given the quantities)."

    Lopez and Assous seem to be a bit confused on this, since they treat

    higher wages, leading to higher output... will lead, in turn, to higher profits

    As one of the points where Kalecki is strongly at variance with Marx.

    I think I also got confused because my understanding of "vulgar economics" (prior to your essay) was the emphasis of supply and demand dynamics and see this as sufficient, rather than looking beneath these fluctuations, at the determinants of long-run relative prices.

  5. Julio was a student of Kalecki, but I doubt that he meant that Kalecki was not a Marxist. Not sure what he says in the book, but it's more probable that is related to what I suggested. While Marx did believe in an inverse relation between w-r in the determination of relative prices, and he developed a critique of Say's Law, he didn't have a theory of effective demand. Kalecki's theory is a complement, and compatible with Marx's theory. Mind you in a theory of output and employment, under certain circumstances (wage-led) growth would benefit capaitalists too.

  6. Yeah. The book makes frequent reference to his first-hand experience with Kalecki, and admiration for him. It actually contains a whole chapter, "Kalecki the Socialist Economist", that examines in detail Kalecki's relationship to Marx. It would probably be stronger if it mentioned Marx's critique of Say's Law. I think I also detect the notion of the Reserve Army of the Unemployed in Kalecki's essays on why capitalists won't allow full employment.

    It has been gratifying to see Kalecki finally getting some notice and appreciation during the last two years. I liked the point Palley made about how Kalecki gives you not just a good economic theory, but also a way to analyze history and society.


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